How To Roll Over A 401(k)—We Help Make It Easy
Have 401(k)s from old jobs lying around? Betterment makes rolling them over into a low-cost IRA account simple and easy.
We’ve streamlined the rollover process to help make your rollover as easy as possible.
Our management fee and investing costs are among the lowest in the industry.
Let’s say you’ve got a 401(k) from an old employer and you’re interested in rolling it over to an IRA. You can roll over your old 401(k) to any IRA provider, so why choose Betterment?
At Betterment, not only do we make the rollover process simple and easy, we also make sure that your funds are placed into a globally diversified investment portfolio that fits your personalized retirement needs—all at a low cost.
You have a 401(k) from an old employer—now what?
Once you no longer work for an employer, you have a few different options when it comes to what you can do with your old 401(k).
The possibilities include:
- Keeping the 401(k) where it is and doing nothing.
- Rolling over the previous 401(k) to your current or future employer’s 401(k).
- Rolling over the 401(k) to an IRA.
- Taking a cash distribution to your personal checking account.
It’s important to consider all of the different options you have. Although there are times where it can make sense to keep your 401(k) where it is, or move it to your new 401(k) plan, doing so may not be in your best interest due to high fees, confusing investment selections, and a lack of holistic financial planning options.
Taking a cash distribution to yourself can be especially harmful because it’s a taxable event and you may be hit with early distribution fees by the IRS.
Note that rolling a 401(k) into either an IRA or another 401(k) is not considered to be a taxable event.
At Betterment, it’s different.
Many larger, more traditional financial institutions and 401(k) providers require lots of paperwork, long waits, and misleading and clunky processes. Additionally, when you actually complete the rollover to an IRA, they likely will charge you lots of hidden fees, charge high fees, or put you in investments that don’t align with your actual retirement goals.
Other 401(k) and IRA Providers May Have…
|Slow, confusing, misleading processes. Many larger, older, legacy 401(k) providers allow you to roll over to IRAs within their system. To do so may include lots of paperwork that’s typically confusing. It can take weeks to actually open up the IRA and complete the rollover.||Simple, efficient, transparent, automated, individualized processes. In just a few clicks, you can open up a Betterment IRA with the appropriate investment strategy, and instantly receive a personalized set of rollover instructions via email. There is zero paperwork required from Betterment.|
|Higher fees, extra fees, poor disclosure. Providers will often find ways to charge you for everything. They have fee schedules, which include fees to open accounts, close accounts, change your allocation, make trades, take withdrawals, etc. The list goes on. The investments themselves may carry high fees on top of the other fees you’re already paying. These providers typically love to bury their hidden fee information in lengthy disclosure documents.||Low cost with transparency. At Betterment we have one fee—our management fee—which covers everything and is one of the lowest in the industry. We don’t have a fee schedule or hidden fees. We don’t charge you to open or close accounts, make withdrawals, change your allocation, etc. The low-cost investments (ETFs) we invest in are among the lowest in cost of funds available for investors.|
|Little or no guidance. Many companies will give you paperwork to fill out to move your 401(k) into an IRA. Once it’s moved to the IRA, the guidance—if there ever was any—ends. Either you will have a self-directed IRA where you do everything yourself, or, you can be put in a managed account where they will charge you lots of fees with little to no transparency. Many times there is no holistic planning around the different financial goals you have.||Advice and hands-on customer service. When you set up a Betterment IRA, the corresponding investment strategy aligns with your specific retirement plan. It can even work in coordination with the rest of your retirement funds. Not only does the website itself provide you with personalized financial advice, we also have a team of Certified Financial Planners™ and an easy-to-reach customer support team.|
We automate the rollover process as much as possible.
With just a few clicks inside of your Betterment account, we will automatically open up either a Traditional IRA or Roth IRA, depending on what type of 401(k) you are rolling over. We do not need any paperwork from you.
Then, we’ll email you a full set of personalized instructions for how to proceed with your rollover. The instructions will lay out the exact next steps to take and the information you need to complete your rollover.
This includes your unique Betterment IRA account number, how your provider should make your rollover check payable, and where they can mail your rollover check.
Some providers may require you to either fill out their rollover paperwork, or even ask you to give them a call to complete a rollover. If so, there’s no way around that. Using the personalized email that Betterment sends you, you can give your 401(k) provider a call and you’ll have all of the information they’ll ask you for right at your fingertips.
Lastly, we will notify you via email as soon as your rollover funds are invested into your Betterment IRA.
You can roll over more than just a 401(k).
It’s important to note that this process does not just apply to 401(k)s. It applies to any employer-sponsored plan that you hold from past employment. This includes pensions, 401(a)s, 457(b)s, profit sharing plans, stock plans, and Thrift Savings Plans (TSPs).
Ready to Roll?
We designed the rollover process to be as smooth as possible. If you have any questions before or during your rollover process, we have a team of customer experience associates available via phone, email or mobile messaging to sort out any questions or concerns you may have.
When deciding whether to roll over a 401(k) account or other retirement accounts, you should carefully consider your personal situation and preferences. Relevant factors may include that: (i) 401(k) accounts may offer greater protection from creditors than IRAs. (ii) In some cases, the ability to take penalty-free distributions at an earlier age or to defer minimum required distributions. (iii) Some 401(k) accounts may also allow for loans or distributions in a broader set of circumstances than IRAs. (iv) Some 401(k) plans may also offer specific educational and advisory services to participants that are unavailable to some IRAs. (v) Some 401(k) plans may have lower fees and expenses than some IRAs. (vi) Some IRAs may offer a broader range of investment options that some 401(k) plans. (vii) Special tax rules may apply to the rollover of employer securities.
You should research the details of your 401(k) and speak to a tax and other advisors about whether the features of your 401(k) are relevant to your personal situation. The rollover process is currently automated for rollovers from select providers. If you have a provider that is not part of our automated process, you will receive an email with a checklist for completing your rollover to Betterment. In processing you rollover request, Betterment will be acting at your direction.
Jon Stein on “How I Built This:” Reflecting On Our Story
Jon Stein joins NPR’s Guy Raz for an episode of “How I Built This” to look back at how Betterment started, what mistakes were made, and how they turned into learnings for the robo-advisor we are today.
What is Form 5330?
If you’ve been told you need to file a Form 5330, you’re probably wondering what it is and why you need to file it.
About Betterment | On Money and the Pursuit of Happiness
Our mission is to provide the best possible answer to the question, "What should I do with my money?" From the cash you spend today to the money you save for tomorrow and beyond, your money is a connection to the things you want and the life you want to live.
How would you like to get started?
Manage spending with Checking
Checking with a Visa® debit card for your daily spending.
Save cash and earn interest
Grow your cash savings for general use for upcoming expenses.
Invest for a long-term goal
Build wealth or plan for your next big purchase.
Invest for retirement
Set up traditional, Roth, or SEP IRAs to save for the golden years.